Chapter 4 Case
Rayovac Corporation: The Rechargeable Battery Opportunity Case Discussion Topics
• Analyze industry and company characteristics;
• Assess opportunities and alternative strategies available to a smaller company competing with larger, better resourced, well-established competitors; • Determine the best strategic direction for the company, given this opportunity and the company’s goals and resources, including establishing strengths and brand awareness in a small market segment to help growth in larger categories; • Understand the power and importance of retailers in highly competitive consumer btands overall, the growing need to gain leverage through building brand portfolios through acquisitions, and leveraging strengths of one brand to facilitate sales of another; • Create a marketing strategy for the new opportunity.
• What is your image of Rayovac batteries?
• Assess the rechargeable market opportunity for Rayovac. Is this a viable growth opportunity for the company to consider? • Market Analysis
o Household battery market in Canada+$300 million, largely due to increases in electronic devices such as cameras and iPods; o Consumers want more power from improved batteries, also drawing activity among competitive battery makers; o Alkaline batteries = most prevalent (70% market) and expected to keep that position, but market not growing significantly compared with other battery technology (especially NiMH); o Rayovac struggled with lower brand recognition, perceived quality, price and performance vs. Duracell and Energizer; o Battery consumer segments included “light users” (less than $25 per year) and “heavy users” (spent up to $250 annually); o Mass merchandisers generated the largest volume of sales, with corresponding need for Rayovac to compete effectively for shelf space (discounting); o Competitors use merging with other consumer goods companies to leverage relationships across brands (Duracell owned by Proctor and Gamble; Energizer through its own acquisitions); o Duracell and Energizer each held 39% of global market and 35% of Canadian market vs. 14% and 20% for Rayovac.
• Company Analysis
o Third largest global consumer battery manufacturer; o Rayovac responded to competitor leveraging across brands through acquisitions under the Spectrum Brands Alliance umbrella;
• The Rechargeable Opportunity
o Company seeking alternative ways to grow its brand name without engaging in head-to-head battles with the leaders; o Rechargeables = 10% of Canadian battery market, but interest increasing due to rising cost of alkaline batteries and need for better battery performance and growing environmentalism; o NiMH batteries can be recharged up to 500 times vs. alkaline; o Problems include lack of consumer awareness, high initial cost of batteries and chargers, initial charging required, and poor performance of earlier rechargeables; o Duracell and Energizer reluctant to promote and cannibalize, as well as being unable to produce the product themselves (import suppliers); o Rayovac had done well holding 20% market share with rechargeables in Canada and had done well with faster-adopting, more environmentally conscious European consumers; o Rayovac wanted to expand presence and awareness in rechargeable segment and gain increased alkaline share;
o Niche Player
▪ Go after Techies as early adopters and their more battery-intensive electronics and niche retailers who sell to them; ▪ 33% better contribution level, more economical to reach, more knowledgeable, motivated sales staffs; ▪ Opportunity to reposition other products away from company’s “value...